Oil demand should outpace supply in the second half of this
year but excess inventories will persist well into 2018, dealing a blow
to global crude producers enacting output cuts to bring down stubbornly
high stockpiles.
The forecast from the International Energy Agency
comes as higher than expected demand growth next year is met by even
stronger output from the US and other producers outside of the Opec
cartel.
In its monthly oil market report, which include forecasts
for next year, the Paris-based energy agency said: "[The] outlook for
2018 makes sobering reading for those producers looking to restrain
supply.”
Opec
and Russia have this year joined forces to cut output and reduce an oil
market surplus that is keeping pressure on prices. Producers agreed in
May to extend production cuts for a further nine months as US shale
production accelerates and countries exempt from the curbs pump more.
The
IEA expects global demand growth will increase by 1.4m b/d next year-
from 1.3m b/d in 2017 – as China and India take total consumption to a
record 99.3m b/d.
But growth in total non-Opec production in 2018,
led by the US, will outpace the demand increase. It is forecast to grow
by 1.5m b/d, which is more than double the rate of growth this year.
US
shale oil production is the biggest component, forecast to grow by
780,000 next year after an increase of 430,000 b/d in 2017. "Such is the
dynamism of this extraordinary, very diverse industry it is possible
that growth will be faster,” the IEA said.
Opec and Russia have
said they seek to bring oil stocks in industrialised nations down to
five year average levels. Inventories are currently 292m barrels above
this target.
"Incorporating the scenario that Opec countries
continue to comply with their output agreement, stocks might not fall to
the desired level until close to the expiry of the agreement in March
2018,” said IEA.
This is despite expectations of an oil market deficit in the latter half of this year, when demand is seasonally stronger.
Opec
crude oil output rose by almost 300,000 b/d in May to around 32m b/d –
the highest level so far this year – as conflict-ridden Libya and
Nigeria, which were exempt from the supply deal, produced more. Total
Opec output is still lower than the more than 33m b/d it pumped in the
last three months of last year.
"’Whatever it takes’ might be the
mantra, but the current form of ‘whatever’ is not having as quick an
impact as expected”, said the IEA, referring to the commitment by the
Saudi energy minister Khalid Al Falih to correct the market imbalance.
"We
have regularly counselled that patience is required on the part of
those looking for the re-balancing of the oil market, and new data leads
us to repeat the message,” the agency said.
(Financial Times)